Microsoft Walks Away From Nscale’s UK AI Data Centre Deal, Leaving a 23,000-Chip Project in Limbo

Microsoft has reportedly withdrawn from an agreement to lease capacity at Nscale’s planned AI data center in Loughton, Essex, putting a project designed to house more than 23,000 Nvidia GPUs in doubt. The site was originally expected to begin delivering computing capacity in early 2027, but grid connection delays could push access to electricity into the 2030s.

The Telegraph first reported Microsoft’s withdrawal. Reuters subsequently reported that the reason for the exit had not been specified, while Nscale said its wider relationship with Microsoft remained strong. Neither company has confirmed that power delays directly caused the withdrawal.

Power Delays Threaten the Loughton Project

Nscale and Microsoft announced the Loughton project in September 2025 as part of a broader UK AI infrastructure commitment. The planned facility was designed to provide 50 megawatts of AI computing capacity, scalable to 90 megawatts, with 23,040 Nvidia GB300 GPUs initially expected to arrive in the first quarter of 2027.

The schedule now faces a major obstacle. According to The Telegraph, grid officials told Nscale that electricity might not reach the site until the 2030s. Such a delay would leave a substantial gap between the original deployment schedule and the availability of the power needed to operate the facility.

Nscale has not announced a revised opening date or a confirmed alternative power solution. It has said it is exploring other sources of power and additional UK expansion locations. The project has not been formally cancelled. But without a viable route to electricity and a replacement customer for the planned capacity, its original timetable is uncertain.

Nscale Says Its Wider Microsoft Relationship Remains Intact

Nscale sought to distinguish the Loughton setback from its other agreements with Microsoft.

“Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts,” an Nscale spokesperson told Reuters.

The statement suggests the withdrawal concerns the specific Essex project rather than Microsoft’s wider commercial relationship with Nscale. The company has not disclosed a replacement tenant or explained how it intends to use the planned capacity if Microsoft no longer leases it.

The distinction matters because Nscale’s business depends on delivering computing infrastructure that customers have contracted to use. A delayed or abandoned facility can affect when the company begins generating revenue from that capacity.

The Withdrawal Comes Ahead of Nscale’s IPO

The reported exit comes as Nscale prepares for a US initial public offering. In its preliminary prospectus, the company warned that losing a major customer or seeing a significant reduction in spending by one of its largest customers could harm its financial performance and future prospects.

Microsoft and Anthropic are identified as expected major customers in the filing. The Loughton withdrawal therefore gives investors a specific project-delivery risk to examine, although it does not establish that Microsoft’s wider contracts with Nscale have changed.

Nscale also faces delivery challenges elsewhere. Bloomberg reported on Oct. 15 that its data center in Glomfjord, Norway, was six months behind schedule, with 6.4 megawatts of a planned 30-megawatt facility operational. The report cited construction delays, cooling-system leaks, regulatory issues and a fire.

The Norwegian project is separate from Loughton, but the delay adds context for investors assessing Nscale’s ability to bring infrastructure online on schedule as it prepares to go public.

A Challenge for the UK’s AI Infrastructure Plans

The Loughton project was part of Microsoft’s announced £22 billion UK AI infrastructure commitment. Its difficulties highlight a basic constraint on the country’s AI ambitions: securing customers and advanced chips is not enough if the electricity needed to run them cannot be delivered on time.

The UK government has acknowledged the problem. Its Delivering AI Growth Zones policy document calls timely grid connections the single biggest obstacle to establishing AI Growth Zones, citing lengthy connection queues and the need to expand network infrastructure.

For Nscale, the immediate questions are whether it can secure alternative power, find a customer for the planned capacity and clarify the project’s schedule. For investors, the issue is whether the company can turn its contracted demand and infrastructure plans into operational facilities on time.